Changes in El Salvador are making this tiny Central American country gain a lot of attention lately. Surf legend Kelly Slater summarized it clearly in his first-ever competition in the country in early June: “The government has really put an emphasis on surf (and bitcoin)”. This optimism and interest have already hit the Bitcoin
Despite not being influential in the day-to-day local economy, massively dominated by USD payments and services, bitcoin is part of President Nayib Bukele’s administration’s strategy to attract capital and opportunities. And it’s working: bitcoin companies and talent are looking into El Salvador despite the bitcoin bear market.
El Salvador’s Bitcoin Strategy Beyond The Local Economy
The bitcoin rewards app Fold announced an expansion in May to operate globally in partnership with VISA and betting on Latin America, and they will do it through El Salvador, as Bitcoin Magazine reported. “El Salvador really was the shining option for us there. There was really no second-best option,” Fold CEO Will Reeves told me in an interview.
The bitcoin-only approach that El Salvador is exhibiting and the incredible talent companies are finding are essential. Still, the regulatory framework also plays a capital role.
“Bukele has announced and implemented some very serious benefits to entities operating out of El Salvador, not only protections, but incentives that are almost unmatched and especially unmatched in North America, Central America, and South America,” Reeves said.
Bitcoin has been a legal tender in El Salvador since 2021, and they already built a Digital Assets law, which regulates many different crypto-assets and the possibility of their emission. Most recently, due to the approbation of the Promotion of Technological Innovation and Manufacturing law in April 2023, tech companies that invest in El Salvador will be acquitted of paying income and capital gains taxes for 15 years. This law applies to entities and companies from El Salvador and abroad, so local startups can also take advantage of it.
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“Every day, companies are calling us here at the embassy to ask us how they can transfer their operations,” El Salvador’s US Ambassador, Milena Mayorga, told me in an interview. For her, this unprecedented interest is an explicit consequence of Bukele’s policies and the friendly regulatory environment El Salvador offers. “We try to get rid of the bureaucracy. We try to accompany them in different meetings, according to the needs of each company,” Mayorga said.
Making A Bitcoin-Friendly Business Environment
For Mayorga, that’s why companies keep flowing to the country. For example, in May, bitcoin payments processor and exchange Strike’s CEO, Jack Mallers, announced they would move their headquarters to the country during the Bitcoin Conference 2023 in Miami. Most recently, fintech solutions developer and stablecoin issuer, Tether
USDT announced their investment in Volcano Energy, a $1 billion joint initiative between the company, the private sector, and El Salvador’s government to mine bitcoin with renewable energies.
“Company formation is also a lot easier now, as is the process of returning or moving to El Salvador with the removal of red tape and taxes,” Bitcoin Office advisor Stacy Herbert acknowledged in an interview with me. Bitcoin Office is a specialized group of advisors that provides suggestions and guidance, upon request, to the government ministries on Bitcoin-related matters. Still, its advisors are doing it for free, as Herbert stated.
The process could be speedy regarding opening a company in El Salvador. “Open a commercial company can take between 8-10 business days, which makes it very competitive,” law and immigration services startup Accelerate’s lawyer associate, Alejandro Muñoz, told me in an interview. The incorporation can be done from abroad through lawyers. Still, investors and entities cannot complete company incorporation procedures online since several notarial requirements exist. There’s where companies like Accelerate find a business niche, and they’re seeing a lot of demand growth.
Central America’s Bitcoin Renaissance
Besides the attention El Salvador is gaining in the bitcoin industry, there are many challenges. Internet connection has to improve; better touristic infrastructure has to be deployed, and even some complementary regulation has to be created.
Ambassador Mayorga explained that Bukele solved the main problem: how El Salvador was perceived. Back then, this tiny country got headlines only for the bad news. But now El Salvador is gaining attention thanks to Bukele’s administration and policies. Security, technology, Bitcoin, even surf, everything is part of the strategy.
Several bitcoin-related activities are happening in the country, and American and Canadian ex-pats generally enjoy what El Salvador offers.
“Many North Americans are asking for Salvadoran citizenship, and it’s one of the greatest interests worldwide. How can they obtain a residence or citizenship; how can they become Salvadoran,” Mayorga argued.
Still, Bitcoin seems disconnected from the average Salvadoran reality, and there’s another improving area.
El Salvador is jumping from a dark era of gang violence to a new phase where tourism, interest, and investments are booming—some crypto advocates call it the Bitcoin Renaissance.